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All that Glitters

GOLD, SILVER, PLATINUM, and PALLADIUM

I would love to have some of each kind of income stream; paychecks, rentals, dividends ect. I also want to hold some of each kind of asset; Cash, Stocks, Bonds, Property, and yes, Precious Metals.

With the exception of ‘property’, precious metal is the oldest source of wealth on mankind’s historical asset list.

Precious Metals value as a currency crosses Geographical and Cultural lines all over the planet and throughout the Ages.

It is time tested and relatively stable in comparison to other forms of value. Cash may be more liquid, more accessible, and ultimately more important. But, PM moves in ways which guarantee its place in our hopes, dreams, and vaults.

It is all about where you stash your wealth. You can keep it in cash. By doing so, you are hoping that the buying power of that cash is not eroded by inflation. You can hope to make gains by putting your money in stocks and bonds. These however, tend to rise and fall with disturbing regularity.

Gold, Silver, Platinum and Palladium (the PMs I deal with) move in opposite directions compared to stocks/bonds and this is important for times when cash becomes less valuable.

Gold/Silver and other HARD Commodities tend to hold their value over the long term and are generally negatively correlated to stocks and bonds.

Don’t get me wrong, the vast majority of my available capital is tied up in cash and the markets. This method has done well for quite some time now, since March 2009 to be exact. But, Greed must be tempered with Reason. This world moves fast and we are not exactly experiencing the most stable Zeitgeist.

An even keel in rough waters requires a broad spectrum of asset allocation.

Gold may be a boring place to store wealth, but it is a safe place to store wealth.

I am probably not a true gold bug, I suggest only a single digit percentage of your overall portfolio should be in PM’s. It is an impractical vessel, but still part of a well rounded family of assets.

Now, on paper or hard metal in your hand?

If you are investing in PM as a hedge against inflation, then holding stock in Mines/EFT’s and ownership of assets that are not in your hand is fine, but if you are holding PM because you fear the collapse of fiat currency, you better have the actual metal in hand.

In the worst case scenario, cash is useless and credit is non existent. In this world pieces of paper that say you owe ‘X amount of ounces in Gold or Silver‘ are just that, little pieces of paper.

I like to hold my PMs because I like looking at them. I keep them in a safe and in a security deposit box.

Next would come burying some in the backyard, but I am not there yet.

I liken holding PMs to buying up land and holding it without making any improvements. It is a limited commodity, in that there is only so much to go around, its long term value is stable, and the holding cost once you buy it is low. The real potential value comes in relation to the changes in the world while you are sitting on it.

Lastly, a little further something on the different members of the Precious Metal Family.

Gold – I have been waiting for a long time for gold to dip down closer to $1,000 an ounce. If it did I would pounce. As it stands now, I buy an ounce here, an ounce there, biding my time.

Silver – unlike Gold, Silver is destroyed in its Industrial use and therefore is a dwindling resource. It is also the poor man’s gold. If you are limited in how much you can commit to buying PMs, the buy SILVER. Roughly, buy Silver to gold at a ratio of 50 to 1.

Platinum – For those with some capital to invest, I thinkPlatinum is the PM du jour. Usually slightly ahead of Gold, it has lagged behind for some time now and is available at under $1,000/ounce.

Palladium – Historically, Russia controls the vast majority of this metal. The Russians are very secretive about the amount of Palladium they are sitting on. That is why Palladium ‘swings’ so much compared to the other PMs. I like it because I bought at $237/ounce and it currently trades closer to $900/ounce. Like silver, it also has practical industrial uses besides just a being a store of value.

I like the info graphic. Gold not so much. It traditionally hasn’t done that well against inflation, let alone the market.

For my tastes if the world collapsed I’d rather have a nearby woods with wildlife and a hunting rifle to supplement a garden. If the world gets so bad you need gold your going to have a hard enough time finding someone willing to fairly trade you for the gold.

I think gold’s return and reduction of volatility in a portfolio tend to really kick in when things get really bad. That is why I feel better with some in the bottom of the safe. Sitting there just in case.

Interesting topic. A coworker of mine (who has a crazy high net worth) always tells me I need to buy into some PMs. I ignore his advice. It seems like PMs just don’t have any return or value… this is not based on any data or research, just my own feelings haha.
I think I need to diversify, though, and look into it.

I like it because it is just so different from the usual stashes of wealth, ie cash, stocks, bonds…. The other thing I think is even more ‘out there’ is farmland, I would love to diversify into that as well someday.